The recent shenanigans in several banks stoked fears of another financial crisis similar to the Great Recession in 2008 or the meltdown of the 1980s (I wrote a book about that one). Not to worry! The basic problems for each of the affected banks boiled down to inadequate risk management and issues specific to their situations rather than any systemwide weakness.
Quick action by the Federal Reserve, Treasury Department, and FDIC have calmed markets and depositors sufficiently to contain the fallout. There will no doubt be some jitters and gyrations around the globe for a while, but the system is sound.
Banks are the arteries of modern economies, taking in deposits from some customers and lending them to others. Usually, when numerous banks have problems on a broad scale, it’s due to high-risk practices (such as the subpar mortgage origination and securitization prior to the Great Recession), changes in the regulatory environment (such as the schizophrenic tax and financial policies which first incentivized syndications and then tanked them in the 1980s), or similar systematic issues.
